A former member of the Office for Budget Responsibility has cast doubt on whether the Government is on track to meet targets to reduce the deficit.
Novus Capital Markets economist Geoff Dicks, who was one of the initial OBR committee members, says the productivity of the UK economy is weak enough that growth and deficit reduction targets could be missed, the Financial Times reports.
Dicks says: “I signed my name to a forecast of underlying productivity growth of 2 per cent, but if I were still at the OBR that is something I would now be questioning.
“My own guess here is that the weakness of productivity growth in the recovery so far is telling us not just that productivity has been lost but that its rate of growth from here on could also be below the 2 per cent we take as ‘constant’.”
Productivity growth is the rate at which output per hour work increases. If this is consistently below the 2 per cent forecast by the OBR, forecasts for deficit reduction would have to be downgraded.
In the March Budget the OBR downgraded its growth forecast for 2011/12 from 2.1 per cent to 1.7 per cent and from 2.6 per cent to 2.5 per cent for 2012/13.
The watchdog’s central forecast is that public sector borrowing should be reduced from 11.1 per cent of GDP in 2009/10 to 1.5 per cent by 2015/16.